# Payout Ratio

*Saving & Investing — Finicade finance glossary*

The payout ratio is the share of earnings paid out as dividends, and it's the fastest test of whether a dividend is safe. Below 60% is generally comfortable for a stable business; above 100% means the company is paying out more than it earns and funding the gap from cash or debt. A very high dividend yield paired with a very high payout ratio is usually a warning that the market expects a cut, not a bargain.

**Formula:** `Payout ratio = Dividends per share ÷ Earnings per share`

**Also known as:** dividend payout ratio, distribution ratio

**Related terms:** [Dividend](https://finicade.com/glossary/dividend), [Dividend Yield](https://finicade.com/glossary/dividend-yield), [EPS (Earnings Per Share)](https://finicade.com/glossary/eps), [Free Cash Flow](https://finicade.com/glossary/free-cash-flow), [Dividend Aristocrat](https://finicade.com/glossary/dividend-aristocrat)

Source: https://finicade.com/glossary/payout-ratio